Weekly Puzzle #6: Market Risk Exposure
The Set up
While risk and return models try to measure risk using regressions of stock returns against market indices, it is only during crisis periods that you really see the differential risk across sectors or businesses. One simple way to back out a measure of market risk exposure (an implied beta) is to take a periodwhere markets were in crisis (say January-February 2016) and look at differences in returns across sectors. It is dangerous to base everything on a month but it is an interesting technique.
This year's Carnage
If you are interested in a longer time period visualization of the sectors, try this link. It is a neat one, since it lets you highlight a sector and see how it shifts over time.
Questions/ discussion issues